4.1.2

Question 1

Advantages to host country

Answer 1

1. Transfer of skills and technology
2. Job creation
3. More corporation tax
4. Economic growth
5. Positive multiplier effect
6. Improves the balance of payments

Question 2

Disadvantages to host country

Answer 2

1. Close down local business
2. Often send profits back to own country
3. Lose cultural identity
4. Exploitation of workers
5. Political influential

Question 3

Advantage to a multinational

Answer 3

1. Economies of scale
2. Larger international markets
3. Take advantage of countries with a comparative advantage
4. More competitive
5. More bargaining power on supplier
6. Avoid taxes
7. Access to trading blocs

Question 4

Disadvantages to a multinational

Answer 4

1. Hard to keep reputation
2. Higher costs
3. Exchange rates can vary
4. It is unethical
5. Cultural differences
6. Diseconomies of scales

Question 5

Advantage of business specialising

Answer 5

1. Specialists staff become very experience in one area
2. All R&D can be focused on hat one area improving results
3. The firm can really get to know it’s market and consumers

Question 6

Disadvantages of a business specialising

Answer 6

1. All eggs in the same basket
2. New entrants into the market could have a major impact on sales
3. Changes in consumer tastes or social trends could make them vulnerable

Question 7

ADV of FDI

Answer 7

Creates jobs resulting in higher household incomes
Higher government tax revenue to provide more subsidies and grants for businesses
Businesses can invest in infrastructure to lower transport costs
Business bring technology and innovation to the country to encourage research and development

Question 8

DIS of FDI

Answer 8

High initial cost of moving and setting up
Businesses may bring their own workers or have capital intensive systems, so new jobs won’t be created
Tax revenue may be lower due to MNCs having too much power